Some businesses' unemployment taxes to rise

Some businesses will see a hike in their unemployment taxes later this year and early next year, but the big unemployment tax increases that are needed to repay federal loans have been pushed into the future.

During the session, the Kansas Legislature tried to fix a system that many viewed as unfairly taxing the least-burdensome businesses.

Under the newly approved system, businesses whose laid-off workers are drawing more than the company paid in taxes — called a "negative balance" — will see an increase in 2012.

Unemployed workers also saw some benefit cuts, when the Legislature reinstituted the one-week delay in the start of benefits. The Legislature also eliminated paying benefits to trailing spouses who move to Kansas, unless the employed spouse is in the military.

The Legislature's work was followed closely by Emily Compton, president and CEO of Goodwill Industries of Kansas. She has been flabbergasted to watch her assessment rise from $31,000 in 2009 to $155,000 in 2011 — a 500 percent increase in two years.

"It hurts," she said. "Every time we pay more into the unemployment compensation fund, it's less money for staff and programs."

What was particularly galling to her is that Goodwill hasn't laid off anyone.

Her bill went up because the Legislature had earlier capped the maximum that businesses could be assessed. As the draw-down on the unemployment trust fund accelerated during the recession, the state couldn't increase assessments on companies that had laid off large numbers of workers. Instead, it had to raise assessments on those who hadn't.

Next year, the news is likely to be better — at least, sort of.

The Legislature reconfigured the formula for companies with a negative balance. They will pay a surcharge of up to 2 percentage points on top of the 7.4 percent tax on the first $8,000 in wages per worker.

That, however, won't come close to rebuilding the fund's debt.

To pay all the claims, the state borrowed $171 million from the federal government. It also was assessed $8 million in interest.

The surcharge will contribute about $7.5 million, according to state figures cited by Eric Stafford, senior director of government affairs for the Kansas Chamber of Commerce.

He said eliminating the waiting week and the trailing spouse provisions is expected to generate savings of $14 million more per year.

That means repaying the trust fund debt won't happen until the formula is reconfigured again.

Business groups, including the Kansas Chamber of Commerce and the Wichita Metro Chamber of Commerce, had lobbied the Legislature to change the formula so that the assessment was levied against more of the worker's salary: from $8,000 per worker to $11,000 per worker over three years.

That would have increased taxes on business, Stafford said, but it would have paid off the debt more quickly, reducing the amount of interest the fund owes.

But in a political compromise this spring, the Legislature voted against it. That keeps taxes down, but it pushes eliminating the debt further into the future.

So, for Compton and other businesses, rates are unlikely to come down for years.